In July, Switzerland experienced a 0.2% monthly decrease in producer and import prices, as reported by the Federal Statistics Office on 14 August 2025. Producer prices declined by 0.3% for the month, with a slight counterbalance from a 0.1% rise in import prices.
Overall, prices for producer and import goods have dropped by 0.9% compared to July of the previous year, mainly due to import prices. While producer prices remained stable year-on-year, import prices fell by 2.8%.
Disinflationary Trend
The drop in producer and import prices confirms a disinflationary trend we have been monitoring throughout 2025. This data, especially the 0.9% year-on-year fall, adds weight to the view that the Swiss National Bank (SNB) will maintain a dovish stance. The upcoming SNB meeting in September is now critical, with pressure mounting for action against low inflation.
This producer price weakness is a strong leading indicator for consumer prices, which we saw came in at a modest 1.1% in the latest July 2025 reading. With inflation remaining stubbornly below the central bank’s 2% target, the possibility of a rate cut later this year is becoming more credible. For now, derivative markets should price in a very low probability of any rate hikes for the foreseeable future.
The key detail is the 2.8% annual decline in import prices, which we attribute to the franc’s persistent strength. With the EUR/CHF exchange rate hovering around the 0.95 level for the past quarter, imported goods are becoming cheaper and suppressing overall inflation. This makes the SNB more likely to intervene verbally or directly to weaken the currency.
Market Opportunities
Given this, we see value in positioning for a weaker franc in the options market. Buying call options on EUR/CHF or USD/CHF offers a defined-risk way to profit from any potential SNB action to stem franc strength. Implied volatility in these pairs has been relatively subdued, presenting an opportunity to enter these positions at a reasonable cost ahead of the September meeting.
Traders should also look at interest rate derivatives tied to the Swiss Average Rate Overnight (SARON). The persistent deflationary signals suggest that Swiss rates are set to remain at current levels or even move lower. Positioning through SARON futures to reflect this “lower for longer” rate environment could be a prudent strategy over the next few months.
We have seen this scenario before in the years leading up to 2015, where the SNB fought a strong franc and deflationary pressures. While the global context is different, it serves as a reminder that the central bank is not afraid to act decisively to achieve its mandate. Therefore, holding positions that benefit from a weaker franc appears to be the logical response to this latest data.
